A paper tiger

When commentators talk about the South-East Asian tiger economies, the Philippines is usually conspicuous by its absence. If it is mentioned at all it is in bewilderment that a country apparently so well placed to lead the region’s surge to prosperity has been left on the starting blocks.

When the Philippines is mentioned it is usually in relation to political instability, corruption in high places, Communist and Muslim insurgencies, mail order brides or the sex trade - hardly subjects likely to inspire the confidence of international investors. Yet in the 1950s, having made a rapid (if not spectacular) recovery from the stringencies and brutality of Japan’s World War II occupation, and with a democratic system in place, it seemed to be a shining example to its neighbours, many of which were still in the process of emerging from the colonial era.

What went wrong? It is too simplistic to blame the stagnation and cronyism that followed the election of President Ferdinand Marcos, or the United States for supporting his imposition of martial law and virtual dictatorship in his latter years. Marcos was ousted in 1986, after submitting himself to an election which the US insisted he call. Two decades have passed and the Philippines’ record of progress has veered from patchy to non-existent.

At a recent meeting of the Canberra branch of the Australian Institute of International Affairs, Australian National University economist Hal Hall pointed out that in the 1960s, per capita income in the Philippines was about twice that of Thailand but now the positions have reversed. He blamed an inward-looking economy that has been slow to meet the challenges of globalisation and the fact that, apart from a brief period during the administration of Fidel Ramos in the mid-1990s, there have been few attempts at any serious restructuring.

While there have been more positive signs of growth in recent years, the country has become increasingly reliant on the $18.5 billion that is remitted by Filipinos working abroad, the third highest remittance level in the developing world after Mexico and India. Anyone who walks around Hong Kong Island on a Sunday afternoon, negotiating the tens of thousands of Filipino servants filling every available space on pavements and in parks, enjoying their one day off, will get an idea of the size of this overseas army of workers. Labour is now one of the Philippines’ biggest exports.

But such a source of income is tenuous to say the least and highly sensitive to economic downturns and nationalistic outbursts in host countries. At best it should be treated as buying time in which to set the house in order at home.

The head of the Political and Social Change Department at ANU’s Research School of Pacific and Asian Studies, Ben Kerkvliet, believes there are a number of factors that make change difficult, including a debilitating insurgency involving the Maoist New People’s Army, Muslim separatists and other splinter groups of varying degrees of effectiveness.

He pointed out that the country has some of the worst inequalities within its citizenry in the Asian region, with poverty levels running at up to 40 per cent of the population. This has had the effect of pushing ever-increasing numbers of the more ambitious and entrepreneurial of the working class to seek better living conditions overseas. The situation is exacerbated by a weak bureaucracy seemingly incapable of devising any solutions to these problems.

Yet another reason for the Philippines’ economic inertia is political. When Marcos fell there was a consensus that no president should ever again be in a position to seize dictatorial powers. Thus a single, six-year term was enshrined in the constitution and, copied from the United States, a politicisation of the higher echelons of the public service with the senior officers following the departing president into retirement.

This virtually turns the president into a lame duck the moment he or she takes the oath of office, and encourages an attitude of making hay while the sun shines for those officers heading the bureaucracy, who see this as a one-off opportunity to insulate themselves and their families against the grim economic realities faced by so many of their fellow country people.

Economic mismanagement and blatant plundering of the public purse, stretching back into the Marcos era, has left the Philippines with a crippling burden of debt resulting in more than one third of its national budget each year going into the pockets of overseas creditors. There is a commission that works full-time chasing billions of dollars originally destined for development projects, some of which only ever existed on paper, the money apparently having disappeared into private bank accounts overseas.

There is a growing awareness that this sorry state of affairs cannot continue. A grass-roots movement involving a number of small, new political parties dedicated to reform has had some success at local level, capturing the mayoralties in a number of towns, and there is a major debate underway over whether the current presidential-style American system should be changed to one closer to the Westminster parliamentary model.

Sadly, what should be a dispassionate debate, crucial to the future of the nation, has become embroiled in politics. The argument that a parliament would be better able to formulate and carry through policies for the long-term good of the country was gaining ground until the intervention of President Gloria Macapagal-Arroyo.

She pronounced herself in favour of the change - under certain conditions, including that the system should be introduced almost immediately, that it should consist of just one legislative chamber, and that there should be a transition period until elections in 2010 during which she would hold the roles of both president and prime minister.

Her political opponents immediately saw this as a power grab, and a backdoor way of extending her term - she is due to stand down in 2007 - while the unicameral nature of her proposal was a way of disposing of the Senate, which has been a source of troublesome opposition to her.

Arroyo has effectively stalled the movement towards constitutional change - which given the Byzantine nature of Filipino politics may have been her intention all along - leaving the country with a stagnating, discredited administrative structure to go with its economy.

That presents a dangerous final option. Groups within the military, including middle-level career officers who are disgusted with political corruption and the failure of their own commanders to pacify the insurgency, may feel they have a role to play. It is a disturbing thought and one that other countries with interests in the region, including Australia and the United States, cannot afford to ignore.